One thing that you haven't considered is the value to NZ of the things consuming power. Data centres employ very few and pay minimal tax by offshoring their profit -- why would we want to host them?
The aluminium smelter ditto: it pays less in salaries and wages to NZ staff than it receives in subsidies, and pays less than $5million/yr in corporate tax. Its 5TWh/yr power consumption could be diverted to the 5TWh/yr industrial gas substitution need that you calculate.
Thanks Ross, yes agree and have concerns about the actual value data centres will bring and have written about this issue a couple of times in the past.
As for Tiwai I think you have a kindred spirit in Winston, but in all seriousness that is also a valid question when it comes to allocating valuable resources to derive the most benefit.
Well done, Larry. Back of the envelope is always a good starting point &/or reality checker. I’m totally frustrated that people like you and Rewiring Aotearoa are left to do & lead all this work. I guess it’s necessary when the politicians seem to be beholden to their funders & are telling the bureaucrats to tow the party line.
I think that there are good folks in the machine room of the bureaucracy, doing good work, but I think those around the cabinet table seldom understand physics or the advice they are recieving.
Interesting. I think Onslow or it's equivalent is going to be necessary. But I also think Geothermal will be the quiet workhorse, directly replacing process heat, maybe in conjunction with heat pumps. I.e either heat pumps using lower temp geothermal to produce higher temperature heat, or vice versa.
Apart from the cost of Lake Onslow project and the interest charged on the cost (which nobody really talks about) the other major problem is that it is a major net power consumer.
It may only produce 70% (or less) of what it consumes. So its ERoEI is 0.7 to 1.
In financial circles if you had a business where the costs were 40% greater than sales it would seem like a dumb business.
Yes, but financially it would buy electricity when it is cheap, and sell when it is expensive. As far as eroei is concerned, it would avoid spilling in the southern dams, and in wind turbines when high winds combine with high solar or hydro production.
I think when the price is low , all the fossil fuel providers shut down , and the cost of production falls to a low level , virtually zero. It would have to take a huge amount of electricity to bump the price back up. it would drop the highest price if it could produce enough to cut out all fossil fuel production , because the price goes to that of the highest cost producer. This is the spot price i am talking about , the fixed rates stay the same. But the fixed prices should be able to drift lower , if they know they don't have cover very high prices in their range. I doubt they take the very low prices into account when fixing , simply take it as extra profit. All of this is why many people think the "market " cannot fix our electricity problems.
I was in favour of Lake Onslow back during the last election, but the huge cost over-runs on Snowy 2.0 are cautionary. Geothermal would add power, instead of just storing it, and is mostly in the North Island, where most of the demand is, and most of the hydro isn't. It's also 24/7, like nuclear (geothermal mines fossil heat largely generated by uranium decay.) Nuclear is the real solution, but if Australia, with massive uranium reserves and bugger all hydro, can't bring themseves to use it yet, we'll probably take even longer.
I think the real pumped solution is pumping water from the headwaters on the west side of the Southern Alps , to the Eastern side lakes. But mostly in National parks , and apparently a environmental and cultural no no . Even though they are less then a kilometre apart.
By the way, the 100TJ gas user would need to spend about $7.5m Capex on a 5MW wood boiler+fuel store, so about 4 year payback versus staying on gas.
So you are right, the high Capex is the hurdle. The Loan Guarantee scheme helps a bit, but doesn't reflect the urgency of the issue the industrial gas users are facing. Co-funding (like the Gas Exploration fund) would seem to be a no-brainer.
Incidentally, an electric boiler plus associated upgrades generally seems to average about $1m per MW. So $7.5m for wood boiler vs $5m for electrification means an extra $2.5m for the wood energy solution. But Opex is say $1.4m vs $5.3m, so that extra Capex is recovered in about 7-8 months.
Of course Wood Energy won't suit all sites, but I'm just making the point that Electrification is not the silver bullet some seem to think....and in the context of industrial heat seems to unnecessarily drain the lakes year round - when we could be using the dispatchable stored solar energy embodied in our plentiful biomass. A coherent Energy Strategy would surely encourage the most suitable fuels for each application....?
At its core, the woke green virus has infiltrated into the political class while demonizing 2 small molecules by characterizing them as pollutants; CO2 emanating from fossil fuels, CH4 emanating from ruminants.
All of the misallocated tasks identified by Larry is wasteful spending to achieve the pointless Net Zero policy. Your taxes are paying for it. Your children and grandchildren may never have the opportunity that we Boomers experienced as children in the 50s and 60s.
Instead the woke green virus focuses on misallocated tasks; stupid EVs, stupid Renewables, stupid BESS, stupid data centres.
Weather dependent industrialized intermittent wind and solar Renewables results in the degradation of our power system, and the reduction of the EROI (energy return on investment); to the point that if the EROI reduces below 15, our economy may never recover; reference earlier NZ Energy substacks.
To avoid that result, we need more fossil fired generation as an interim measure before SMRs (the highest energy density) become commercially available.
As an engineering student in 1969, we listened to the Moon landing. The Moon mission is back because a Moon Base is planned soon using nuclear reactors.
Should you think that's impossible, remember that the record for a Liberty Ship construction/commissioning was 4 days, 15 hours, 30 minutes at Henry Kaiser's Richmond Californian shipyard in November 1942.
You're right Don energy density is king and the achievements of our forefathers were impressive in today's context. Keeping with the maritime theme you might want to take a trio down memory lane to the 21st of July 1959 and the launch of the NS Savannah.
Unaware until now, checked on Wikipedia, thanks Larry for the commentary.
Transpower's Future Grid popped up yesterday; 6 scenarios; 3 category assessments; cheapness, sustainability and reliability; recognizing that fossil fueled peaker plant is part of the mix; most power system engineers would agree; however criticized by the woke green virus as we would all expect.
Generation principles for successful operation includes cheapness, abundance, stability, security, reliability, dependability, resilience and system strength. Kathryn Porter covers most of these. Hopefully Transpower should expand their category assessments. At some stage I could add analogies so that the readers have a familiarity with power system concepts.
Thanks Larry, very informative. Just wondering if you should add a deindustrialization item to reduce the total required in 2036? Also, the 2pc economic growth assumption may be linked or net of this? Are you assuming that the mbie trend line for falling electricity usage will immediately reverse and head upwards again (excluding other factors)?
Great analysis Larry. I just presented a webinar last week to look at the Business case for industrial gas users switching from gas to either an electric boiler or to a wood boiler. A factory using 100,000GJ of gas per year at $35/GJ (I'm seeing this quite a bit) would go from paying $3.5m/year for natural gas to $5.3m/year for electricity if paying 22.5c/kWh - this is after accounting for the exergy factor your refer to.
The total wood energy Opex (incl extra maintenance) would vary between $1.0m/year for the cheapest (hogged slash or sawmill chip) up to a maximum of $1.8m/year for diverted export logs, including chipping. Wood pellets would be a bit more.
As you'll know, we export about 20 million tonnes of logs annually, and that's around 140PJ (!) The cheapest 40PJ of export logs identified by RETA, have an average "At-Wharfe-Gate" price of about $14/GJ. So locally grown energy, creating jobs, creating local demand for a low-value export product, carbon neutral, dispatchable, resilient. Just sayin' Simeon.
Great comment thanks Rob, I agree electrification isn't always the best solution for fuel switching. I think wood has potential in some applications but I think that natural drying is key to making it more economically viable at scale.
Some handy numbers to think about in this comment thanks again Rob, much appreciated.
The problem with hogged fuel is the low net heating value (LHV), and just transporting water around as moisture in the fuel. It has a low net energy density. Google, 'case for biocoal' and 'forest to furnace', arboreal energy.
Yes, I agree it's not ideal carting a lot of water around Alex. But the transport logistics and Lower Heating Value of the wet fuel are already factored into the maths shown in my comment. Biocoal (torrefied pellets) will cost around $35/GJ (+/- $5/GJ) so don't offer enough savings to justify any Capex. And you need 3 tonnes of biomass to make one tonne of biocoal, and lots of energy. So, unfortunately, the maths does not stack up in the vast majority of scenarios.
Like and agree with the ERoEI concept you advocate for Alex. I think Arboreals challenge is to overcome the logistics of your biocoal production at the forest skid at the volumes required to replace industrial coal usage. Obviously your product needs a solid-fuel boiler, which the big gas users would need to install, so they'd normally prefer to pay closer to $10/GJ to get the payback required.
"the big gas users ..... prefer to pay closer to $10/GJ"
Imported LPG sent through the pipeline network will be $35 per GJ?
each self powered skid site machine will produce about 60 tonne per day. There will be at least 200 such machines distributed around the country. Giving a 1,200 tonne per day production at over >20GJ per tonne.
Numbers are such fun, eh? Nothing wrong with a back-of-envelope stab at things. I have long been sceptical of the more rah-rah utterances of the wind/solar crew, simply because each is completely weather-dependent. And 'electrification' introduces significant replacement expenses.
Batteries and power components of e.g. inverters or wind turbines have to be replaced at 12-15 years. Solar panels at 25 to 30 years. Wind turbine blades... Compensating grid devices such as auto-tap transformers which work harder under conditions of oscillating voltage (those Clouds....) . Wind droughts....and then there's the disposal of solar panels, turbine blades and so on at end-of-life.
Plus the build-out of transmission, as wind and solar are inherently low-output, widely-dispersed generation sources, and the accompanying maintenance burdens on lines and cables plus interconnections.
Plus the effects of 'emergence' - the unpredictable behaviours that thousands to millions of grid-coupled devices can exhibit as each measures, reacts, injects or withdraws such aspects as voltage, reactive power, or synthetic inertia.
Most of these effects don't show up immediately: decades can pass, then Consequences Loom. Long after the rah-rah crew have moved on, the manufacturers (like car and computer retailers) have folded their tents and departed, the componentry failures happen on shortening timeframes. It is then discovered that entire 'new' devices are needed, that software cannot be patched anymore, that it is easier to just doze the turbines and panel paddocks (with an all-electric D11, of course) and let the next crop of rah-rah merchants convince us into the Next Big Thang.
Hi Wayne, yes we get too focused on LCOE without considering the full system costs (FSCOE). Integrating intermittent generation introduces non-linear costs that rise very fast as the percentage of intermittency increases. I also note that emergence is a very good point to watch out for.
Interesting analysis Larry. Your BoTE numbers are not so far from Transpower’s official forecasts in their latest Te Kanapu work, which is a good sanity check I suppose. I’ve personally and professionally expressed my skepticism for Transpower’s analysis based on the fact (as your write up here points out) that NZ electricity demand has actually been falling for the last ten years. It actually goes back even further than that if you look at the MBIE data.
Probably the biggest two quibbles I have with your numbers is the assumed data centre load increase and the economic growth increase. If you take both of these away, then we are not too far away from today in terms of final electricity demand, which given the actual data from the last 16 years seems to be more plausible.
Why I think it’s defensible to challenge the data centre and economic growth numbers:
1. California. There has been a large electrification including multiple data centres there and final electricity demand is actually down.
2. Many countries in Europe experienced GDP growth with little or no electrical demand growth.
I’m an advocate for a “wait and see” approach around this, which means that we should go light on government intervention and Transpower should be restrained in building more grid. Renewables are now coming on the the grid in record numbers, which is starting to have a significant impact on wholesale prices.
If it turns out that the “demand tap” suddenly turns on then there are short term solutions that can buy us time (batteries, potentially diesel) to do the long term costly grid upgrades and wait for even more renewables to appear.
In other words, what I’m saying here is that if you look at the data, this whole “crisis” is somewhat manufactured and we should just let industry and the market get on with doing what they do best. Deploying technology and responding to market signals. I see no evidence of problems.
Thanks Brad, Transpower's Te Kanapu work is on my reading list but I haven't got there yet so that's interesting.
This piece was speculative but I agree with you that there is a very real risk that we build a lot of infrastructure and but continue the downward consumption trend. We really need to benchmark against our competitor markets to gauge what our future industries will be. I have long maintained that we need prices similar to BC in Canada to be competitive on time products for example.
You may be right that we lose other energy intensive industries, gain more data centres and see a net fall in our electricity demand, that is entirely feasible also.
GDP is a complicated topic as it is a measure of economic value. When I propose these things I always try to frame it as "real GDP", as in production with out the financial derivatives.
I think there is a genuine problem for gas users and they do not have any good options in front of them. For some fuel switching will make sense but for many its just too CAPEX intensive and leaves them with higher OPEX. They will just keep going until they can't get gas then shut up shop. We have seen some doing this already unfortunately.
Thanks for the great comment, very much appreciated.
Larry thanks for doing this and being open in showing where your figures come from. A couple of comments -
Firstly and perhaps almost irrelevant, you use a capacity factor of 16% for farm solar - does this take into account that most farm use pretty much matches solar output eg irrigation- the more the sun you have the more pumping you need to do for irrigation? And people that put in solar maximising their self use so they make the most of their investment, so the issues with lines being able to handle export volumes tends to be a lot less than you would think. The crashing prices of batteries and with more people putting them in along with the solar help with this.
Secondly the Electricity Authorities count of 46,000MW addition to the national grid in the pipeline, is as you say a significant figure even if it was only at 10% capacity factor isn't that 4.6GW of additional capacity? with 8760 hours in a year thats just over 400TWh additional annual generation (at 10% capacity factor) isn't it? While you dismiss this by saying not all of it will be built, don't you think most of it actually will? So even if we said only half of it gets built that is almost 10x more than you have worked out we need. There are lots of caveats in there including my maths, but it does indeed look like the maths is actually mathing.
Just lastly, The EA say that 17% of this new generation won't be intermittent, won't most of the rest of the GW added be wind, which unlike hydro doesn't have low generation years and unlike solar generates as much in winter as summer? So the winter low solar generation thing is not as big an issue as it might be?
Hi Peter, you would get 400TWh if the 46GW had a capacity factor of 100%, however at 10% it would be 40TWh/y which is plenty for this scenario in principle. I think 10% is too low and if you assumed it was 50%/50% solar and wind you would have something closer to 25% capacity factor.
The thing to watch with the EA's number is that it includes BESS as generation which is a bit misleading.
I think you make a very good point about on farm solar. The opportunity for daytime use to irrigate, pump water up to header tanks, run milk chillers etc is very good. As such the capacity factor issue isn't really an issue and the capability to do work is much higher during the day.
Hi Bruce, yes demand management would be very important in this scenario and being able to coordinate car charging to either increase or decrease demand would be a big part of that I suspect.
Bruce you say " if it get too hot the solar output drops… and if the wind is too strong or weak the turbines don’t spin…We need better solutions than goldilocks generators"
Firstly my understanding is that solar panels just drop a few % points in power production when they get hot - less than 10%, so that is almost irrelevant. Did turbines sure in very strong winds shut down and in very light winds don't generate. But in 95% of wind speeds they are fine. What we need to accept is flipping from continuous generation from our other generators to bringing these intermittent generators into our mix as they are the cheapest. We are super fortunate in NZ to have a large hydro resource already in place that is perfect for balancing wind and solar: when the sun isn't shining we use our hydros, and when it is shinning again we hold water back for the next cloudy spell. Likewise with wind. And that without mentioning batteries whose price is continuing to crash.
Whether you can defend the intermittent nature or not the fact is they are intermittent. And due to this very nature unreliable. Spending on unreliable generation is money that is not spent on reliable generation. Unreliables can only work because there is reliable generation. I would rather money was spent on those that are reliable. And those that generate. Coal, hydro, geothermal, gas.
Coal and gas aren't reliable as you have to be continually supplying them with feedstock. Even if you ignore the greenhouse gas emissions from using coal and gas (and why would you do that?), relying on LNG from overseas is not reliable as recent events in the Strait of Hormuz have shown us. And relying on coal even if it is NZ sources relies on mining and long delivery chains that are subject to disruption and price variability. Wind and sun on the other hand are the same price - free all the time and aren't subject to supply constraints for fuel other than naturally occurring lulls.
We have lived off grid for 30 years on mainly solar with a little bit of wind. The batteries are the key of course and they have crashed in price. Our power system is much more reliable than the grid with only 1 power cut in all those years.
Hydro resources huh? NZ has about 6 weeks of energy stored behind dams at best.. which means if there is a lack of rain over the Sth Island going into winter then you stop being smug about how great the system is and move to very worried… do you remember the winter of 2024 when prices hit $800/MWh?
On a $ value of installed capacity solar and battery are the cheapest option, but that is like driving fast only looking in the rear vision mirror…. It’s not the cost of installation that matters, with the cost of delivered energy in GWh that matters…. Geothermal costs c$8m - $9m per installed MW, but runs at around 95% so is an excellent source of energy…. Solar on the other hand runs at about 22% for part of the day for $2m per MW and necessarily requires batteries that only run for a out 2 hours per day and then need to be refilled before being useful again….
Bruce in 2024 we didn't have big solar and wind resources to enable the hydro dams to throttle back and store some water for the dry winter ahead. Yes we only have a month or so storage in our dams (or at least we did have at the high % reliance we had on hydro*), but sunless & windless periods are often not at the same time and even if they were, never for a month at a time.
*As we increase our geothermal, solar and wind resources the reliance on hydro decreases.
You need to catch up. Your 22% for solar is no different to the fact that with beloved coal, most of the energy is wasted as heat rather than feeding the grid.
On a personal note, we have found it economic to install PV and a battery system, such that we are a net power exporter. Even in winter we now use only 30% of power previously, even though we run the heat pump more.
Stay in the doom and gloom sky is falling must fry the climate xaml if you want. I left and couldn't be happier
Well quite… but a thermal plant can run all night and solar can’t… and that’s the problem…. Batteries with the current technology can only last about 2 hours before going ‘dark’….
Kudos Larry. The back of an envelope (ironically now a rare thing) is the sort of calculation I can understand. 90% plus Kiwi homes are connected to the hydro grid (no such thing a a Dry Year) and if we put them ahead of modern business needs, instead of using their domestic power bills as a tax by another name to benefit monopoly Electricity shareholders I imagine (like the song lyrics) NZ would be a happier place.
Well done on the analysis. If we were to consider this is the optimists view of where we could head as an economy, even before you've scoped out where the 22TWhr of extra energy is going to come from, I think that there is also a pressing need to do an extremely pessimistic commentary of what might happen if the status quo of the highest bidders for energy takes all and the devil takes the hindmost were to continue.
Currently our government philosophy of the market knows all, and will decide who prospers, means that our large primary production processing plants survive until world commodity prices dip and then they go under, with jobs and single employer "rust belt" towns going with them (think forestry, process vegetables and meat processing or dairy with a severe downturn). It begs the question around what will be left of our industrial economy and who might really benefit from what's left, and who will really pay for the maintenance of our existing energy system, and/or the expansion to the next level if we are brave enough to go there.
Hi Angus if you go back through some of my older posts you will get a much more pessimistic view. I fully agree the de-industrialisation trend is baked in when we are seeing electricity prices increase by about 8% per year and we are trying to compete in international markets for high volume low margin commodities.
I think they threw the baby out with the bath water during the Bradford reforms and we now find ourselves in a very tricky position.
It’d be interesting to analyse the cost scenarios under this type of event. Appreciating that’s very complicated, but it’ll be pretty extreme I’d expect. Because not only is new, and more expensive generation added (rationally the ‘easy’ renewable schemes get added first, and then more expensive schemes such as Castle Hill are added next to meet demand), but there’s the transmission and distribution system enhancements and build (which are already driving significant increases in delivered prices to the meter). The aggregate demand supply picture probably looks a bit bleak (a mostly electrified system, but an increasingly deindustrialised economy).
Hi Nick the generation is not to hard to estimate. Concept consulting did some work for Transpower last year and had the average cost of wind at something like $3600/KW and solar at $1900/KW for installed capacity.
Cost the grid to support this is where it gets really complicated. It would need to have a lot of support features like storage, firming and stability equipment.
I agree with you aggregate supply / demand picture prediction.
Great analysis, thanks.
One thing that you haven't considered is the value to NZ of the things consuming power. Data centres employ very few and pay minimal tax by offshoring their profit -- why would we want to host them?
The aluminium smelter ditto: it pays less in salaries and wages to NZ staff than it receives in subsidies, and pays less than $5million/yr in corporate tax. Its 5TWh/yr power consumption could be diverted to the 5TWh/yr industrial gas substitution need that you calculate.
Thanks Ross, yes agree and have concerns about the actual value data centres will bring and have written about this issue a couple of times in the past.
https://newzealandenergy.substack.com/p/the-280mw-question?r=ubsbu
https://newzealandenergy.substack.com/p/energy-hungry-tech-bros-add-to-our?r=ubsbu
As for Tiwai I think you have a kindred spirit in Winston, but in all seriousness that is also a valid question when it comes to allocating valuable resources to derive the most benefit.
There is only one conclusion....
NZ IS DOOMED.
The entire world is doomed
But that is just the ongoing challenge of life.
https://fasteddynz.substack.com/p/collapse-and-cannibalism
Well done, Larry. Back of the envelope is always a good starting point &/or reality checker. I’m totally frustrated that people like you and Rewiring Aotearoa are left to do & lead all this work. I guess it’s necessary when the politicians seem to be beholden to their funders & are telling the bureaucrats to tow the party line.
Thanks Stephen, much appreciated.
I think that there are good folks in the machine room of the bureaucracy, doing good work, but I think those around the cabinet table seldom understand physics or the advice they are recieving.
Interesting. I think Onslow or it's equivalent is going to be necessary. But I also think Geothermal will be the quiet workhorse, directly replacing process heat, maybe in conjunction with heat pumps. I.e either heat pumps using lower temp geothermal to produce higher temperature heat, or vice versa.
Agree geothermal is going to be increasingly important. Especially given its proximity to the golden triangle and NI gas users.
Hopefully the south Island comes up with some too , they have Hamner Springs and tePuia springs , so there must be something viable there.
Yep, cow stream is a great place to stop for a hot pool after a winter hunt.
Had to google that one , looks great.
Apart from the cost of Lake Onslow project and the interest charged on the cost (which nobody really talks about) the other major problem is that it is a major net power consumer.
It may only produce 70% (or less) of what it consumes. So its ERoEI is 0.7 to 1.
In financial circles if you had a business where the costs were 40% greater than sales it would seem like a dumb business.
Yes, but financially it would buy electricity when it is cheap, and sell when it is expensive. As far as eroei is concerned, it would avoid spilling in the southern dams, and in wind turbines when high winds combine with high solar or hydro production.
Yes but...
If they started buying when it was cheap, the demand would go up and it would no longer be cheap.
And if they sell when it is expensive, the demand and price would go down.
Not a simple economic model
I think when the price is low , all the fossil fuel providers shut down , and the cost of production falls to a low level , virtually zero. It would have to take a huge amount of electricity to bump the price back up. it would drop the highest price if it could produce enough to cut out all fossil fuel production , because the price goes to that of the highest cost producer. This is the spot price i am talking about , the fixed rates stay the same. But the fixed prices should be able to drift lower , if they know they don't have cover very high prices in their range. I doubt they take the very low prices into account when fixing , simply take it as extra profit. All of this is why many people think the "market " cannot fix our electricity problems.
i do understand how in theory it is meant to work.
How much power do you think the pumps for filling Onslow will draw?
Also net losses (rain less evaporation) from the lake is 1 metre per year.
And then take into account 8% interest on $16B.
Also the fluctuating mass of water in the area causing seismic risk?
I believe Onslow is a boondoggle
I was in favour of Lake Onslow back during the last election, but the huge cost over-runs on Snowy 2.0 are cautionary. Geothermal would add power, instead of just storing it, and is mostly in the North Island, where most of the demand is, and most of the hydro isn't. It's also 24/7, like nuclear (geothermal mines fossil heat largely generated by uranium decay.) Nuclear is the real solution, but if Australia, with massive uranium reserves and bugger all hydro, can't bring themseves to use it yet, we'll probably take even longer.
I think the real pumped solution is pumping water from the headwaters on the west side of the Southern Alps , to the Eastern side lakes. But mostly in National parks , and apparently a environmental and cultural no no . Even though they are less then a kilometre apart.
By the way, the 100TJ gas user would need to spend about $7.5m Capex on a 5MW wood boiler+fuel store, so about 4 year payback versus staying on gas.
So you are right, the high Capex is the hurdle. The Loan Guarantee scheme helps a bit, but doesn't reflect the urgency of the issue the industrial gas users are facing. Co-funding (like the Gas Exploration fund) would seem to be a no-brainer.
Incidentally, an electric boiler plus associated upgrades generally seems to average about $1m per MW. So $7.5m for wood boiler vs $5m for electrification means an extra $2.5m for the wood energy solution. But Opex is say $1.4m vs $5.3m, so that extra Capex is recovered in about 7-8 months.
Of course Wood Energy won't suit all sites, but I'm just making the point that Electrification is not the silver bullet some seem to think....and in the context of industrial heat seems to unnecessarily drain the lakes year round - when we could be using the dispatchable stored solar energy embodied in our plentiful biomass. A coherent Energy Strategy would surely encourage the most suitable fuels for each application....?
At its core, the woke green virus has infiltrated into the political class while demonizing 2 small molecules by characterizing them as pollutants; CO2 emanating from fossil fuels, CH4 emanating from ruminants.
All of the misallocated tasks identified by Larry is wasteful spending to achieve the pointless Net Zero policy. Your taxes are paying for it. Your children and grandchildren may never have the opportunity that we Boomers experienced as children in the 50s and 60s.
Instead the woke green virus focuses on misallocated tasks; stupid EVs, stupid Renewables, stupid BESS, stupid data centres.
Weather dependent industrialized intermittent wind and solar Renewables results in the degradation of our power system, and the reduction of the EROI (energy return on investment); to the point that if the EROI reduces below 15, our economy may never recover; reference earlier NZ Energy substacks.
To avoid that result, we need more fossil fired generation as an interim measure before SMRs (the highest energy density) become commercially available.
As an engineering student in 1969, we listened to the Moon landing. The Moon mission is back because a Moon Base is planned soon using nuclear reactors.
Should you think that's impossible, remember that the record for a Liberty Ship construction/commissioning was 4 days, 15 hours, 30 minutes at Henry Kaiser's Richmond Californian shipyard in November 1942.
You're right Don energy density is king and the achievements of our forefathers were impressive in today's context. Keeping with the maritime theme you might want to take a trio down memory lane to the 21st of July 1959 and the launch of the NS Savannah.
Unaware until now, checked on Wikipedia, thanks Larry for the commentary.
Transpower's Future Grid popped up yesterday; 6 scenarios; 3 category assessments; cheapness, sustainability and reliability; recognizing that fossil fueled peaker plant is part of the mix; most power system engineers would agree; however criticized by the woke green virus as we would all expect.
Generation principles for successful operation includes cheapness, abundance, stability, security, reliability, dependability, resilience and system strength. Kathryn Porter covers most of these. Hopefully Transpower should expand their category assessments. At some stage I could add analogies so that the readers have a familiarity with power system concepts.
Thanks Larry, very informative. Just wondering if you should add a deindustrialization item to reduce the total required in 2036? Also, the 2pc economic growth assumption may be linked or net of this? Are you assuming that the mbie trend line for falling electricity usage will immediately reverse and head upwards again (excluding other factors)?
Thanks, that’s a good point and I actually expect the deindustrialisation to continue if we can’t get the price of electricity down.
The full system cost of electricity is much higher than the LCOE which will increasingly be a challenge going forward.
So yes you’re right there could be a deindustrialisation bar on the demand reduction side.
Great analysis Larry. I just presented a webinar last week to look at the Business case for industrial gas users switching from gas to either an electric boiler or to a wood boiler. A factory using 100,000GJ of gas per year at $35/GJ (I'm seeing this quite a bit) would go from paying $3.5m/year for natural gas to $5.3m/year for electricity if paying 22.5c/kWh - this is after accounting for the exergy factor your refer to.
The total wood energy Opex (incl extra maintenance) would vary between $1.0m/year for the cheapest (hogged slash or sawmill chip) up to a maximum of $1.8m/year for diverted export logs, including chipping. Wood pellets would be a bit more.
As you'll know, we export about 20 million tonnes of logs annually, and that's around 140PJ (!) The cheapest 40PJ of export logs identified by RETA, have an average "At-Wharfe-Gate" price of about $14/GJ. So locally grown energy, creating jobs, creating local demand for a low-value export product, carbon neutral, dispatchable, resilient. Just sayin' Simeon.
Great comment thanks Rob, I agree electrification isn't always the best solution for fuel switching. I think wood has potential in some applications but I think that natural drying is key to making it more economically viable at scale.
Some handy numbers to think about in this comment thanks again Rob, much appreciated.
The problem with hogged fuel is the low net heating value (LHV), and just transporting water around as moisture in the fuel. It has a low net energy density. Google, 'case for biocoal' and 'forest to furnace', arboreal energy.
Yes, I agree it's not ideal carting a lot of water around Alex. But the transport logistics and Lower Heating Value of the wet fuel are already factored into the maths shown in my comment. Biocoal (torrefied pellets) will cost around $35/GJ (+/- $5/GJ) so don't offer enough savings to justify any Capex. And you need 3 tonnes of biomass to make one tonne of biocoal, and lots of energy. So, unfortunately, the maths does not stack up in the vast majority of scenarios.
Arboreal Energy biocoal priced at $20perGJ
Like and agree with the ERoEI concept you advocate for Alex. I think Arboreals challenge is to overcome the logistics of your biocoal production at the forest skid at the volumes required to replace industrial coal usage. Obviously your product needs a solid-fuel boiler, which the big gas users would need to install, so they'd normally prefer to pay closer to $10/GJ to get the payback required.
"the big gas users ..... prefer to pay closer to $10/GJ"
Imported LPG sent through the pipeline network will be $35 per GJ?
each self powered skid site machine will produce about 60 tonne per day. There will be at least 200 such machines distributed around the country. Giving a 1,200 tonne per day production at over >20GJ per tonne.
Numbers are such fun, eh? Nothing wrong with a back-of-envelope stab at things. I have long been sceptical of the more rah-rah utterances of the wind/solar crew, simply because each is completely weather-dependent. And 'electrification' introduces significant replacement expenses.
Batteries and power components of e.g. inverters or wind turbines have to be replaced at 12-15 years. Solar panels at 25 to 30 years. Wind turbine blades... Compensating grid devices such as auto-tap transformers which work harder under conditions of oscillating voltage (those Clouds....) . Wind droughts....and then there's the disposal of solar panels, turbine blades and so on at end-of-life.
Plus the build-out of transmission, as wind and solar are inherently low-output, widely-dispersed generation sources, and the accompanying maintenance burdens on lines and cables plus interconnections.
Plus the effects of 'emergence' - the unpredictable behaviours that thousands to millions of grid-coupled devices can exhibit as each measures, reacts, injects or withdraws such aspects as voltage, reactive power, or synthetic inertia.
Most of these effects don't show up immediately: decades can pass, then Consequences Loom. Long after the rah-rah crew have moved on, the manufacturers (like car and computer retailers) have folded their tents and departed, the componentry failures happen on shortening timeframes. It is then discovered that entire 'new' devices are needed, that software cannot be patched anymore, that it is easier to just doze the turbines and panel paddocks (with an all-electric D11, of course) and let the next crop of rah-rah merchants convince us into the Next Big Thang.
Hi Wayne, yes we get too focused on LCOE without considering the full system costs (FSCOE). Integrating intermittent generation introduces non-linear costs that rise very fast as the percentage of intermittency increases. I also note that emergence is a very good point to watch out for.
Interesting analysis Larry. Your BoTE numbers are not so far from Transpower’s official forecasts in their latest Te Kanapu work, which is a good sanity check I suppose. I’ve personally and professionally expressed my skepticism for Transpower’s analysis based on the fact (as your write up here points out) that NZ electricity demand has actually been falling for the last ten years. It actually goes back even further than that if you look at the MBIE data.
Probably the biggest two quibbles I have with your numbers is the assumed data centre load increase and the economic growth increase. If you take both of these away, then we are not too far away from today in terms of final electricity demand, which given the actual data from the last 16 years seems to be more plausible.
Why I think it’s defensible to challenge the data centre and economic growth numbers:
1. California. There has been a large electrification including multiple data centres there and final electricity demand is actually down.
2. Many countries in Europe experienced GDP growth with little or no electrical demand growth.
I’m an advocate for a “wait and see” approach around this, which means that we should go light on government intervention and Transpower should be restrained in building more grid. Renewables are now coming on the the grid in record numbers, which is starting to have a significant impact on wholesale prices.
If it turns out that the “demand tap” suddenly turns on then there are short term solutions that can buy us time (batteries, potentially diesel) to do the long term costly grid upgrades and wait for even more renewables to appear.
In other words, what I’m saying here is that if you look at the data, this whole “crisis” is somewhat manufactured and we should just let industry and the market get on with doing what they do best. Deploying technology and responding to market signals. I see no evidence of problems.
Thanks Brad, Transpower's Te Kanapu work is on my reading list but I haven't got there yet so that's interesting.
This piece was speculative but I agree with you that there is a very real risk that we build a lot of infrastructure and but continue the downward consumption trend. We really need to benchmark against our competitor markets to gauge what our future industries will be. I have long maintained that we need prices similar to BC in Canada to be competitive on time products for example.
You may be right that we lose other energy intensive industries, gain more data centres and see a net fall in our electricity demand, that is entirely feasible also.
GDP is a complicated topic as it is a measure of economic value. When I propose these things I always try to frame it as "real GDP", as in production with out the financial derivatives.
I think there is a genuine problem for gas users and they do not have any good options in front of them. For some fuel switching will make sense but for many its just too CAPEX intensive and leaves them with higher OPEX. They will just keep going until they can't get gas then shut up shop. We have seen some doing this already unfortunately.
Thanks for the great comment, very much appreciated.
California power demand is probably down because they have the highest power rates in the lower 48.
Or maybe they just lie...to support their green groupie agenda
Oh so economic growth is possible...with declining energy consumption....hahahaha...
Anything is possible...in DelusiSTAN
BTW...california is a province in that country...
Larry thanks for doing this and being open in showing where your figures come from. A couple of comments -
Firstly and perhaps almost irrelevant, you use a capacity factor of 16% for farm solar - does this take into account that most farm use pretty much matches solar output eg irrigation- the more the sun you have the more pumping you need to do for irrigation? And people that put in solar maximising their self use so they make the most of their investment, so the issues with lines being able to handle export volumes tends to be a lot less than you would think. The crashing prices of batteries and with more people putting them in along with the solar help with this.
Secondly the Electricity Authorities count of 46,000MW addition to the national grid in the pipeline, is as you say a significant figure even if it was only at 10% capacity factor isn't that 4.6GW of additional capacity? with 8760 hours in a year thats just over 400TWh additional annual generation (at 10% capacity factor) isn't it? While you dismiss this by saying not all of it will be built, don't you think most of it actually will? So even if we said only half of it gets built that is almost 10x more than you have worked out we need. There are lots of caveats in there including my maths, but it does indeed look like the maths is actually mathing.
Just lastly, The EA say that 17% of this new generation won't be intermittent, won't most of the rest of the GW added be wind, which unlike hydro doesn't have low generation years and unlike solar generates as much in winter as summer? So the winter low solar generation thing is not as big an issue as it might be?
Hi Peter, you would get 400TWh if the 46GW had a capacity factor of 100%, however at 10% it would be 40TWh/y which is plenty for this scenario in principle. I think 10% is too low and if you assumed it was 50%/50% solar and wind you would have something closer to 25% capacity factor.
The thing to watch with the EA's number is that it includes BESS as generation which is a bit misleading.
I think you make a very good point about on farm solar. The opportunity for daytime use to irrigate, pump water up to header tanks, run milk chillers etc is very good. As such the capacity factor issue isn't really an issue and the capability to do work is much higher during the day.
Great comment thanks!
I make 4.6GW x 8760 hours as 40TWh/y, not 400.
I guess a lot of the transport load can be powered by intermittent generators as vehicles are only plugging a certain times… but other load??
And as the UK has just demonstrated.. if it get too hot the solar output drops… and if the wind is too strong or weak the turbines don’t spin…
We need better solutions than goldilocks generators…
Hi Bruce, yes demand management would be very important in this scenario and being able to coordinate car charging to either increase or decrease demand would be a big part of that I suspect.
Bruce you say " if it get too hot the solar output drops… and if the wind is too strong or weak the turbines don’t spin…We need better solutions than goldilocks generators"
Firstly my understanding is that solar panels just drop a few % points in power production when they get hot - less than 10%, so that is almost irrelevant. Did turbines sure in very strong winds shut down and in very light winds don't generate. But in 95% of wind speeds they are fine. What we need to accept is flipping from continuous generation from our other generators to bringing these intermittent generators into our mix as they are the cheapest. We are super fortunate in NZ to have a large hydro resource already in place that is perfect for balancing wind and solar: when the sun isn't shining we use our hydros, and when it is shinning again we hold water back for the next cloudy spell. Likewise with wind. And that without mentioning batteries whose price is continuing to crash.
Whether you can defend the intermittent nature or not the fact is they are intermittent. And due to this very nature unreliable. Spending on unreliable generation is money that is not spent on reliable generation. Unreliables can only work because there is reliable generation. I would rather money was spent on those that are reliable. And those that generate. Coal, hydro, geothermal, gas.
Coal and gas aren't reliable as you have to be continually supplying them with feedstock. Even if you ignore the greenhouse gas emissions from using coal and gas (and why would you do that?), relying on LNG from overseas is not reliable as recent events in the Strait of Hormuz have shown us. And relying on coal even if it is NZ sources relies on mining and long delivery chains that are subject to disruption and price variability. Wind and sun on the other hand are the same price - free all the time and aren't subject to supply constraints for fuel other than naturally occurring lulls.
We have lived off grid for 30 years on mainly solar with a little bit of wind. The batteries are the key of course and they have crashed in price. Our power system is much more reliable than the grid with only 1 power cut in all those years.
Hydro resources huh? NZ has about 6 weeks of energy stored behind dams at best.. which means if there is a lack of rain over the Sth Island going into winter then you stop being smug about how great the system is and move to very worried… do you remember the winter of 2024 when prices hit $800/MWh?
On a $ value of installed capacity solar and battery are the cheapest option, but that is like driving fast only looking in the rear vision mirror…. It’s not the cost of installation that matters, with the cost of delivered energy in GWh that matters…. Geothermal costs c$8m - $9m per installed MW, but runs at around 95% so is an excellent source of energy…. Solar on the other hand runs at about 22% for part of the day for $2m per MW and necessarily requires batteries that only run for a out 2 hours per day and then need to be refilled before being useful again….
As Larry notes… it doesn’t math.
Bruce in 2024 we didn't have big solar and wind resources to enable the hydro dams to throttle back and store some water for the dry winter ahead. Yes we only have a month or so storage in our dams (or at least we did have at the high % reliance we had on hydro*), but sunless & windless periods are often not at the same time and even if they were, never for a month at a time.
*As we increase our geothermal, solar and wind resources the reliance on hydro decreases.
You need to catch up. Your 22% for solar is no different to the fact that with beloved coal, most of the energy is wasted as heat rather than feeding the grid.
On a personal note, we have found it economic to install PV and a battery system, such that we are a net power exporter. Even in winter we now use only 30% of power previously, even though we run the heat pump more.
Stay in the doom and gloom sky is falling must fry the climate xaml if you want. I left and couldn't be happier
Well quite… but a thermal plant can run all night and solar can’t… and that’s the problem…. Batteries with the current technology can only last about 2 hours before going ‘dark’….
Just cover Northland in panels and buy a trillion dollars of battery storage and all will be good...sarc
Kudos Larry. The back of an envelope (ironically now a rare thing) is the sort of calculation I can understand. 90% plus Kiwi homes are connected to the hydro grid (no such thing a a Dry Year) and if we put them ahead of modern business needs, instead of using their domestic power bills as a tax by another name to benefit monopoly Electricity shareholders I imagine (like the song lyrics) NZ would be a happier place.
Thanks Winston you’re bringing me around to your way of thinking comment by comment. The net value proposition of Tiwai may need to be assessed.
Hi Larry,
Well done on the analysis. If we were to consider this is the optimists view of where we could head as an economy, even before you've scoped out where the 22TWhr of extra energy is going to come from, I think that there is also a pressing need to do an extremely pessimistic commentary of what might happen if the status quo of the highest bidders for energy takes all and the devil takes the hindmost were to continue.
Currently our government philosophy of the market knows all, and will decide who prospers, means that our large primary production processing plants survive until world commodity prices dip and then they go under, with jobs and single employer "rust belt" towns going with them (think forestry, process vegetables and meat processing or dairy with a severe downturn). It begs the question around what will be left of our industrial economy and who might really benefit from what's left, and who will really pay for the maintenance of our existing energy system, and/or the expansion to the next level if we are brave enough to go there.
Hi Angus if you go back through some of my older posts you will get a much more pessimistic view. I fully agree the de-industrialisation trend is baked in when we are seeing electricity prices increase by about 8% per year and we are trying to compete in international markets for high volume low margin commodities.
I think they threw the baby out with the bath water during the Bradford reforms and we now find ourselves in a very tricky position.
Thank you Larry, appreciated 👍🏼
You're most welcome as always thanks Martin.
It’d be interesting to analyse the cost scenarios under this type of event. Appreciating that’s very complicated, but it’ll be pretty extreme I’d expect. Because not only is new, and more expensive generation added (rationally the ‘easy’ renewable schemes get added first, and then more expensive schemes such as Castle Hill are added next to meet demand), but there’s the transmission and distribution system enhancements and build (which are already driving significant increases in delivered prices to the meter). The aggregate demand supply picture probably looks a bit bleak (a mostly electrified system, but an increasingly deindustrialised economy).
Hi Nick the generation is not to hard to estimate. Concept consulting did some work for Transpower last year and had the average cost of wind at something like $3600/KW and solar at $1900/KW for installed capacity.
Cost the grid to support this is where it gets really complicated. It would need to have a lot of support features like storage, firming and stability equipment.
I agree with you aggregate supply / demand picture prediction.
Thanks for the great comment.
This is almost a magnum opus. Well done.
Demographics; aging population and immigration, linked to per capita wealth and energy consumption. Demography is destiny.
De industrialisation seems to be an ongoing trend, can that be reversed?
Exergy efficiency of electricity is very valid, especially for transport.
Car-to-grid is possibly a partial cure for the dispatch problems associated with wind and solar generation, if it can be implemented.
N fertilizer, steel making coke and methanol could derive carbon feedstock from 'biocoal' (provided by Arboreal Energy)
But also need to be aware of the embedded energy in complex solutions.
Energy Transition and sustainability in general is a 'Wicked Problem'
Thanks Alex, much appreciated.
I agree it is a wicked problem and there are diminishing returns on complexity.
I don't know if the trend can be reversed, it think its the inevitable conclusion to the overall aggregate EROI of our energy system falling.